Norges Bank Investment Management (NBIM) manages the fund on behalf of the Ministry of Finance, which owns the fund on behalf of the Norwegian people. To learn more about the fund’s market value, click here. The fund’s market value rose to NOK 4,182 billion in the second quarter of 2013.
The Ministry of Finance regularly transfers petroleum revenue to the fund. The capital is invested abroad, to avoid overheating the Norwegian economy and to shield it from the effects of oil price fluctuations. The fund invests in international equity and fixed-income markets and real estate. The aim is to have a diversified investment mix that will give the highest possible risk-adjusted return within the guidelines set by the ministry.
No pension payments
The fund was set up to give the government room for manoeuvring in fiscal policy should oil prices drop or the mainland economy contract. It also served as a tool to manage the financial challenges of an ageing population and an expected drop in petroleum revenue. The fund was designed to be invested for the long term, but in a way that made it possible to draw on when required.
The fund was called the Petroleum Fund until 2006 when it was renamed the Government Pension Fund Global. The change highlighted the fund’s role in saving government revenue to finance an expected increase in future public pension costs. Despite its name, the fund has no formal pension liabilities. No political decision has been made as to when the fund may be used to cover future pension costs.
Fiscal policy tool
The fund is an integrated part of the government’s annual budget. Its capital inflow consists of all government petroleum revenue, net financial transactions related to petroleum activities, net of what is spent to balance the state’s non-oil budget deficit.
This means the fund is fully integrated with the state budget and that net allocations to the fund reflect the total budget surplus, including petroleum revenue. The so-called spending rule that no more than 4% of the fund’s return should over time be spent on the annual national budget was first established in 2001.
Responsible investment practice
Responsible investment practice has become something that more and more investors wish to incorporate into their strategies. As a major player, Norway wants to contribute to the development of best practice in this area. The guidelines for the observation and exclusion of companies from the Fund’s investment universe provides that the assets in the fund shall not be invested in companies that produce weapons that violate fundamental humanitarian principles through their normal use, including cluster munitions and nuclear weapons.
The Council on Ethics
The Council on Ethics provides an evaluation of whether investments in specified companies are inconsistent with the ethical guidelines. The Ministry of Finance makes the decision on exclusion of companies from the Fund's investment universe based on recommendations of the Council. The Ministry's decision and the recommendation of the Council are made publicly available on the Ministry's website.
Investments in Japan
As of 31 December 2012, the Government Pension Fund Global held investments of NOK230.3 billion (or about USD39.5 billion) in Japan, by far the largest share among countries in Asia, and a total share of equities and bonds of 6,1%. A full list of the fund’s holding of equities from the same date can be seen here.